Most large businesses operate LANs at several sites to meet their data communications needs. The businesses lease dedicated circuits from NSPs to connect their LANs into Wide Area Networks (WANs). Because distinct customers of the NSP lease distinct dedicated circuits, their WANs are isolated from another, thereby meeting data security requirements.
The dedicated circuits are available in fixed bandwidths (e.g. DS1, DS3). Customers must lease a dedicated circuit that meets their maximum bandwidth requirements. Because typical data traffic is bursty, whereas the dedicated circuits provide a fixed bandwidth at all times, the dedicated circuits are frequently operating below capacity. Consequently, customers typically pay for more dedicated circuit capacity than they would need if the NSP's network capacity could be shared more efficiently among customers while preserving the required isolation between networks of distinct customers.
The IEEE 802.1 standard defines a protocol that enables an Ethernet LAN to be partitioned into multiple Virtual LANs (VLANs), each VLAN being isolated from the other VLANs. Large businesses typically use the IEEE 802.1 protocol to partition their LANs into VLANs for distinct interest groups within the business.
The IEEE 802.1 standard requires that a header of each frame of data carry a VLAN tag that identifies the VLAN for which the data frame is intended. Switches (or “bridges”) of the LAN read the header and route the data frames to only those ports which, according to routing tables (or “filter databases”) stored at the switches, are participating in that VLAN. The 12 bit capacity of the VLAN tag specified by the IEEE 802.1 standard limits the number of distinct VLANs to 4095. NSPs need to support many more than 4095 distinct customers on a shared network.